The portfolio is under transition away from peer-to-peer lending exposure towards ‘balance sheet’ loans.
The £343m VPC Specialty Lending fund has increased its dividend for the first time in 18 months to 1.7p per share with the distribution fully covered by income, according to regulatory filings. This represents the first dividend increase after five consecutive quarters with a 1.5p dividend distribution.
The investment trust is the second largest portfolio offering investors exposure to the nascent market for online lending and alternative credit, a fast growing segment of the private debt world. The latest dividend follows a tricky period for performance of the trust that even saw it move to a double digit discount in its Net asset Value and subsequently the launch of a share buy-back policy.
The managers of the fund have been moving into greater balance sheet exposure in 2017 instead of loans from p2p and marketplace lending platforms,
The Victory Park Capital management team say this change reflects increased income generation in the portfolio as more capital is allocated to balance sheet investments with further scope for growth.
“In due course, we believe there is further upside potential for the dividend as additional capital is allocated to balance sheet investments,” VPC said.
Whilst the news is no doubt pleasing for investors the dividend for the second quarter of 2017 is still somewhat below its target although the company continues to target a quarterly dividend of 2p over the medium term.
To the end of July, the closed ended fund’s income increased for the seventh consecutive month to 0.76 per cent. This was offset, however, by a capital return of -0.25 per cent for a net total return of 0.51 per cent.
Income was derived predominantly from the company’s balance sheet loans, which the firm says “continued to perform strongly”. In the same period marketplace loans and securitization hit performance hitting the portfolio’s NAV by 0.21 per cent and - 0.15 per cent respectively.
Balance sheet debt investments accounted for 69 per cent of NAV compared to 66 per cent and marketplace loans accounted for 15 per cent of NAV. At the end of July, the Company had investments in debt instruments of 27 Portfolio Companies, 22 of which were structured as balance sheet investments.